Customer experience, not management experience, manufacturing expertise or marketing weight, is what brings about enduring business success online. The better you know your target market as individuals, not as segments, the better you are able to identify and exploit those unique spaces which offer the best potential.
The Good Old Days
There was a time when companies could rely on their customers to behave in a more or less predictable way. Most markets had crystallized into clearly defined territories, and you knew who your competitors were. As a marketer, your differential advantages were defined by the blunt instruments of geography and price, refined a little by brand promise and values. The customer was merely a target segment. Barriers to competitive entry were high, especially for small start-ups who could not afford the marketing or infrastructure costs of local or national, launches. Faced with the limited choices that mass marketing imposed, consumers were content to make compromises. Life was good.
Then the web opened the gates to competitors of all sizes from all over the globe. Not only were those competitors able, with a little design thinking and a lot of customer focus, to be much more effective than established big businesses, they were able to do it without having to make massive strategic investments. Moreover, because many of them were start-ups with no legacy baggage, they could target very specific needs of individual customers, providing products and services that were more relevant than those on offer by mass marketers. Because such businesses have relatively low overheads and, as they are able to sell to customers around the world, non-viable local niches collectively become very attractive global markets.
The Red Queen Effect
There is a spiral in marketing innovation. Owning an uncontested space is a worthy goal for a smart business, because it’s easier to fend off invaders than to be the aggressor. Even easier if potential aggressors don’t see you as a foe. But as innovative businesses attract customers, they eventually also attract competitors. Those competitors will mimic the features which made the market originator successful, and they will do it louder and cheaper. It’s inevitable, and it’s known as the Red Queen effect: Market originators grow to a point where connection with customers fades, ability to adapt atrophies, and corporate thinking takes over, leaving them vulnerable to exactly the kind of niche sniping they exploited in their youth. As products tend to commoditization in their functionality, and the race to the bottom on price heats up, the only place to be, once again, is not in the race. It’s time to originate a new market.
Differentiation takes place in the heads and hearts of the customers, not in the functional spec sheet of a product.
This is why we have a crowded smart phone market, containing all but one of the manufacturers, and an uncontested iPhone market with one phone occupying its own rather profitable universe. As it did with laptops, instead of fighting for market share by developing and producing a whole range of decreasingly profitable products, Apple sits out the race and convinces its customers that it is “not one of those.”
This is achieved not through product design alone, but through design thinking throughout the organisation. Yes, Apple’s products are pretty to look at. But they are even more attractive to use and to own. The UI is intuitive (at least for someone who has never used a PC or Android); the UX is pleasing; and the CX is smugness-inducing. The extrinsic attributes of Apple’s products are more compelling than the intrinsic attributes – by design.
Customer Experience Is Everything
In much the same way that a high-end perfume brand creates a sense of personal emotional value (attractiveness, confidence, poise) that vastly exceeds the essence of the liquid in the bottle, Apple induces a profound sense of contentment and elitism in its users which way exceeds the technical performance of the product. Of course, they could not sustain this if the product was not good to begin with, but their marketing is a massive force multiplier which pushes back the boundaries of their uncontested territory and turns their customers into their most ardent salespeople.
In obliging its customers to use Apple-only products, services, content and distribution channels, the brand frees them from the burden of having to make choices – which in a daunting big bang tech world is a massive CX advantage over any other player. Simultaneously, not having to invest in development and marketing of a hundred range extensions boosts the bottom line and keeps management focused. Apple’s simplicity of range also manages to instill a sense of elitism, putting its customers inside the walls of its private garden, proud to be paying a premium. That’s a branding trick other designers would love to pull off – imagine if the only accessories you could wear with your Dior gown were Dior shoes, Dior jewelry, Dior perfume.
Apple is only one example of successful uncontested-market innovation strategy. Starbucks managed it in fast beverages, Zappos in e-commerce, Capitec in banking. They all crafted strategies to create and own an exclusive profitable space for a long time by positioning themselves as so different, that even the heritage industries which inspired them didn’t regard them as in the same industry. They focused on a single product, an unsatisfied customer need extrinsic to the core product’s functionality, and global scalability. And they executed flawlessly.
The key is to understand the unsatisfied customer needs that mean a lot emotionally to individuals but which existing industry players dismiss as trivial.
You cannot innovate sustainably without empathizing with your intended customers on a human level. Today, neither technological superiority nor price advantages are sustainable for long. The value that you add to your customer’s processes, how you make them feel, is why they adopt you and stick with you. Customer experience is everything.